A rotation out of AI winners deepened Thursday as cooling US jobs data failed to stem selling in semiconductor stocks, sending the Nasdaq lower even as the Dow Jones Industrial Average hit a record.
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Semiconductor stocks slide 5% as cooling jobs data fuels rotation
A rotation out of AI winners deepened Thursday as cooling US jobs data failed to stem selling in semiconductor stocks, sending the Nasdaq lower even as the Dow Jones Industrial Average hit a record.
The Nasdaq Composite fell 0.8% to 25,382.67 as semiconductor stocks extended their decline, while the Dow Jones Industrial Average rallied 594.83 points, or 1.1%, to a record 52,900.07. The S&P 500 finished virtually unchanged at 7,483.24, even as seven of every 10 stocks within the index rose.
"The labor market isnt overheating," said Brian Jacobsen, chief economic strategist at Annex Wealth Management. He said the data could allow the Federal Reserve to wait through the summer for more inflation clues before deciding on rate hikes.
The divergence between the Dow and the Nasdaq reflected a sharp sector rotation: chipmakers led losses while consumer and industrial stocks gained. Micron Technology dropped 5.5%, extending a 10.6% plunge the prior session, and Lam Research sank 10.2%. Nvidia, the $4.7 trillion AI bellwether, fell 1.4%. On the upside, National Beverage climbed 7.5% after announcing a $3.25 per share special dividend, and Dollar Tree added 2.4% on a $2.5 billion buyback authorization.
The rotation signals growing investor skepticism that massive AI capital expenditure will translate into proportional profit growth, a concern that has erased more than $1 trillion from semiconductor valuations since mid-June. The next test comes July 30 when the Federal Reserve meets, with traders pricing an 82% chance of no rate hike, according to CME Group data.
Selloff Extends Beyond US Borders
The decline in chip stocks extended a reversal from the first halfs historic rally, when shares of memory makers like Samsung and SK Hynix more than tripled, driving South Koreas Kospi index up 125% in its strongest first half since at least 1990. The Kospi sank 7.9% on Thursday, its worst single-day drop since a 10% plunge a week earlier, as those same names led declines. Japans Nikkei 225 fell 2.5% and Shanghais Composite lost 2%.
Treasury Yields Slide as Jobs Data Misses
The 10-year US Treasury yield fell to 4.48% after the Labor Department reported employers added 57,000 jobs in June, well below the 100,000 consensus estimate. The data eased fears that accelerating inflation from higher oil prices would force the Fed to resume its tightening cycle. Brent crude settled at $71.80 a barrel, up 0.3%, paring earlier losses. European markets diverged, with Frances CAC 40 rallying 1.7%.
The rotation out of AI hardware stocks has also weighed on software names: Microsoft, down 24% year-to-date, hit a one-year low last week as investors shifted holdings from software into semiconductor stocks earlier in the year, only to reverse that trade in recent weeks.
This article is for informational purposes only and does not constitute investment advice.
[1] Chip Stocks Tumble Again[2] Shares in chipmakers underpinning AI boom rocket in first half of 2026 - The Guardian[3] AI rally cracks: Why Asian markets are crashing while Indian IT stocks bounce back[4] Wall Street quietly mixed as chip companies continue to lose ground following Wednesday’s sell-off[5] CNBC Daily Open: Chips are down, OpenAI's woos the White House, and Russia strikes
